Gold, Silver Face Defining Test at Key Resistance Levels, US Data Ahead

XAU/USD, XAG/USD PRICE FORECAST:

MOST READ: Japan Maintain Economic Outlook, USD/JPY Catches its Breath at Weekly High

Gold and Silver have enjoyed decent rallies at the back end of last week with Gold in particular continuing to rally yesterday. An improvement in sentiment weighed on the US Dollar helping Gold run toward a key resistance area between the $1926-$1929 area as markets await a batch of key data from the US in particular.

CHINA STIMULUS AND US DATA AHEAD

As Gold looks to continue its recent run China did provide some form of stimulus yesterday as they asked some funds to evade net equity sales to boost the market. This was followed up this morning with news and rumors that China is weighing up a further cut to deposit rates in a further bid to boost growth and alleviate pressure.

Market participants seem to be appeased for now at least as we have seen more positive sentiment this week which has weighed on the US Dollar. This in return has allowed Gold to maintain momentum while allowing Silver to hold the high ground.

The US is back with a host of data releases which could have a significant impact on commodities. The Fed are still sticking to data dependent rhetoric and this week’s key releases could give us a clearer sign of what to expect from the Federal Reserve’s September meeting.

Later today we will get CB Consumer Confidence numbers before markets focus on the 2nd estimate of GDP growth. The week will come to a close with two big events for the US economy with the Core PCE data and NFP report coming out on Friday. These two data releases could hold a lot of sway on the Feds decision at the September meeting.

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TECHNICAL OUTLOOK AND FINAL THOUGHTS

Form a technical perspective, Gold prices have made an impressive run toward the 50-day MA which rests just above a key resistance area between 1926-1929. Having rallied from the weekly low around the $1884 mark to around $1926 before a slight pullback yesterday. This is a delicate position for Gold at present with a break needed above the $1926-$1929 handle for me to be convinced that Gold bulls are back in control.

Alternatively, a move lower from here will bring the 200-day MA back into focus around the $1911 handle. I was surprised by the speed at which Gold broke back above the 200-day MA, given the fact that we had traded above it since December 2022.

Markets do appear to be largely driven by the fundamental and macro pictures at the moment and thus my initial thoughts are that any move will likely be dependent on the continuation of the risk-on sentiment we are seeing at the start of the week. The market reaction of late to data releases and policymaker comments have been mixed and sometimes downright confusing. A shift in sentiment could re-invigorate US Dollar bulls and push Gold toward fresh lows.

Gold (XAU/USD) Daily Chart – August 25, 2023

Source: TradingView, Chart Prepared by Zain Vawda

Silver has been interesting of late as it continues to hold the high ground around the 24.30 resistance area. This will be the fourth successive day that the price remains compressed between the resistance level and the 100-day MA around 23.94.

A failure to break above resistance could leave Silver vulnerable to further downside. A lot of support to the downside however could mean any such move may be short lived with the 20, 50 and 200-day MAs all resting between 23.20 and the 23.50 area. Interesting time ahead for Silver as it appears a catalyst may be needed if we are to see a convincing breakout from here. Will US data facilitate the move?

Silver (XAG/USD) Daily Chart – August 29, 2023

Source: TradingView, Chart Prepared by Zain Vawda

Taking a quick look at the IG Client Sentiment, retail trader data shows 82% of traders are net-long on Silver.

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Written by: Zain Vawda, Markets Writer for DailyFX.com

Contact and follow Zain on Twitter: @zvawda